Arcutis Biotherapeutics, Inc. 10-Q

Item 1. Financial Statements ARCUTIS BIOTHERAPEUTICS, INC. Condensed Consolidated Balance Sheets (In thousands, except share and par value) (unaudited) September 30, December 31, 2025 2024 ASSETS Current assets: Cash and cash equivalents $ 47,120 $ 71,335 Restricted cash 308 617 Marketable securities 143,948 156,620 Trade receivables, net 115,116 73,066 Inventories 22,419 14,526 Prepaid expenses and other current assets 20,313 19,656 Total current assets 349,224 335,820 Property, plant, and equipment, net 1,215 1,041 Intangible assets, net 15,375 9,479 Operating lease right-of-use asset 4,567 1,953 Other assets 596 596 Total assets $ 370,977 $ 348,889 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 5,795 $ 14,220 Current portion of long-term debt, net 1,000 — Accrued and other current liabilities 92,975 66,793 Total current liabilities 99,770 81,013 Operating lease liability, long-term 5,276 2,562 Long-term debt, net 107,498 107,203 Other long-term liabilities 360 570 Total liabilities 212,904 191,348 Commitments and contingencies (Note 7) Stockholders’ equity: Preferred stock, $ 0.0001 par value; 10,000,000 shares authorized at September 30, 2025 and December 31, 2024; no shares issued and outstanding at September 30, 2025 and December 31, 2024 — — Common stock, $ 0.0001 par value; 300,000,000 shares authorized at September 30, 2025 and December 31, 2024; 120,288,146 and 117,848,033 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively 12 12 Additional paid-in capital 1,313,602 1,279,479 Accumulated other comprehensive loss ( 62 ) ( 7 ) Accumulated deficit ( 1,155,479 ) ( 1,121,943 ) Total stockholders’ equity 158,073 157,541 Total liabilities and stockholders’ equity $ 370,977 $ 348,889 See accompanying notes to the condensed consolidated financial statements. 1 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (In thousands, except per share data) (unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Revenues: Product revenue, net $ 99,219 $ 44,755 $ 244,569 $ 97,182 Other revenue — — 2,000 28,000 Total revenues 99,219 44,755 246,569 125,182 Operating expenses: Cost of sales 8,685 5,503 25,007 12,223 Research and development 19,604 19,501 56,600 61,940 Selling, general and administrative 62,404 58,817 195,576 171,784 Total operating expenses 90,693 83,821 277,183 245,947 Income (loss) from operations 8,526 ( 39,066 ) ( 30,614 ) ( 120,765 ) Other income (expense): Other income, net 2,035 4,182 6,861 13,455 Interest expense ( 3,071 ) ( 6,653 ) ( 9,082 ) ( 21,617 ) Income (loss) before income taxes 7,490 ( 41,537 ) ( 32,835 ) ( 128,927 ) Provision for income taxes 80 — 701 324 Net income (loss) $ 7,410 $ ( 41,537 ) $ ( 33,536 ) $ ( 129,251 ) Other comprehensive income (loss): Unrealized gain (loss) on marketable securities 68 771 ( 164 ) 528 Foreign currency translation adjustment ( 95 ) 56 109 1 Total other comprehensive income (loss) ( 27 ) 827 ( 55 ) 529 Comprehensive income (loss) $ 7,383 $ ( 40,710 ) $ ( 33,591 ) $ ( 128,722 ) Earnings (loss) per share: Basic $ 0.06 $ ( 0.33 ) $ ( 0.26 ) $ ( 1.08 ) Diluted $ 0.06 $ ( 0.33 ) $ ( 0.26 ) $ ( 1.08 ) Weighted-average shares used in computing earnings (loss) per share: Basic 127,623 124,302 126,891 119,628 Diluted 132,885 124,302 126,891 119,628 See accompanying notes to the condensed consolidated financial statements. 2 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Condensed Consolidated Statements of Changes in Stockholders’ Equity (In thousands) (unaudited) Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders’ Equity Shares Amount Balance—December 31, 2024 117,848 $ 12 $ 1,279,479 $ ( 7 ) $ ( 1,121,943 ) $ 157,541 Issuance of common stock upon the exercise of stock options 110 — 395 — — 395 Issuance of common stock upon the vesting of restricted stock units 1,180 — — — — — Stock-based compensation expense — — 9,915 — — 9,915 Unrealized loss on marketable securities — — — ( 137 ) — ( 137 ) Foreign currency translation adjustment — — — 4 — 4 Net loss — — — — ( 25,060 ) ( 25,060 ) Balance—March 31, 2025 119,138 12 1,289,789 ( 140 ) ( 1,147,003 ) 142,658 Issuance of common stock upon the exercise of stock options 19 — 61 — — 61 Issuance of common stock upon the vesting of restricted stock units 522 — — — — — Shares issued pursuant to the employee stock purchase plan 119 — 1,319 — — 1,319 Stock-based compensation expense — — 10,717 — — 10,717 Unrealized loss on marketable securities — — — ( 95 ) — ( 95 ) Foreign currency translation adjustment — — — 200 — 200 Net loss — — — — ( 15,886 ) ( 15,886 ) Balance—June 30, 2025 119,798 12 1,301,886 ( 35 ) ( 1,162,889 ) 138,974 Issuance of common stock upon the exercise of stock options 197 — 1,476 — — 1,476 Issuance of common stock upon the vesting of restricted stock units 293 — — — — — Stock-based compensation expense — — 10,240 — — 10,240 Unrealized gain on marketable securities — — — 68 — 68 Foreign currency translation adjustment — — — ( 95 ) — ( 95 ) Net income — — — — 7,410 7,410 Balance—September 30, 2025 120,288 $ 12 $ 1,313,602 $ ( 62 ) $ ( 1,155,479 ) $ 158,073 See accompanying notes to the condensed consolidated financial statements. 3 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Condensed Consolidated Statements of Changes in Stockholders’ Equity (In thousands) (unaudited) Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders’ Equity Shares Amount Balance—December 31, 2023 96,787 $ 9 $ 1,070,558 $ 4 $ ( 981,904 ) $ 88,667 Issuance of shares of common stock net of discount and issuance costs of $ 10,820 18,158 3 161,679 — — 161,682 Issuance of common stock upon the exercise of stock options 22 — 82 — — 82 Issuance of common stock upon the vesting of restricted stock units 538 — — — — — Stock-based compensation expense — — 10,030 — — 10,030 Unrealized loss on marketable securities — — — ( 116 ) — ( 116 ) Foreign currency translation adjustment — — — ( 21 ) — ( 21 ) Net loss — — — — ( 35,382 ) ( 35,382 ) Balance—March 31, 2024 115,505 12 1,242,349 ( 133 ) ( 1,017,286 ) 224,942 Issuance of common stock upon the exercise of stock options 147 — 806 — — 806 Issuance of common stock upon the vesting of restricted stock units 443 — — — — — Shares issued pursuant to the employee stock purchase plan 384 — 649 — — 649 Stock-based compensation expense — — 12,523 — — 12,523 Unrealized loss on marketable securities — — — ( 127 ) — ( 127 ) Foreign currency translation adjustment — — — ( 34 ) — ( 34 ) Net loss — — — — ( 52,332 ) ( 52,332 ) Balance—June 30, 2024 116,479 12 1,256,327 ( 294 ) ( 1,069,618 ) 186,427 Issuance of common stock upon the exercise of stock options 139 — 394 — — 394 Issuance of common stock upon the vesting of restricted stock units 380 — — — — — Stock-based compensation expense — — 10,530 — — 10,530 Unrealized gain on marketable securities — — — 771 — 771 Foreign currency translation adjustment — — — 56 — 56 Net loss — — — — ( 41,537 ) ( 41,537 ) Balance—September 30, 2024 116,998 $ 12 $ 1,267,251 $ 533 $ ( 1,111,155 ) $ 156,641 See accompanying notes to the condensed consolidated financial statements. 4 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Condensed Consolidated Statements of Cash Flows (In thousands) (unaudited) Nine Months Ended September 30, 2025 2024 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 33,536 ) $ ( 129,251 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense 30,304 32,337 Amortization of intangible assets 4,104 1,646 Non-cash interest expense 1,295 2,809 Net accretion on marketable securities ( 2,105 ) ( 5,805 ) Other non-cash items, net 631 367 Changes in operating assets and liabilities: Accounts receivable, net ( 42,050 ) ( 33,133 ) Inventories ( 7,324 ) ( 135 ) Prepaid expenses and other current assets ( 742 ) ( 882 ) Accounts payable ( 8,425 ) 2,334 Accrued liabilities 26,592 18,850 Operating lease liabilities ( 554 ) ( 547 ) Net cash used in operating activities ( 31,810 ) ( 111,410 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of marketable securities ( 157,806 ) ( 237,421 ) Proceeds from maturities of marketable securities 172,418 231,507 Milestone payment for intangible asset ( 10,000 ) — Purchases of property and equipment ( 686 ) ( 143 ) Net cash provided by (used in) investing activities 3,926 ( 6,057 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock upon exercise of stock options 1,932 1,282 Proceeds from issuance of common stock pursuant to employee stock purchase plan 1,319 649 Proceeds from issuance of common stock, net of issuance costs — 161,682 Net cash provided by financing activities 3,251 163,613 Effect of exchange rate changes on cash 109 ( 1 ) Net (decrease) increase in cash, cash equivalents, and restricted cash ( 24,524 ) 46,145 Cash, cash equivalents, and restricted cash at beginning of period 71,952 89,323 Cash, cash equivalents, and restricted cash at end of period $ 47,428 $ 135,468 SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING INFORMATION: Milestone for intangible asset not yet paid in cash $ — $ 5,000 Right-of-use assets obtained in exchange for operating lease liabilities $ 2,858 $ — SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Interest expense paid in cash $ 7,787 $ 19,253 See accompanying notes to the condensed consolidated financial statements. 5 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Condensed Consolidated Financial Statements (unaudited) 1. Organization and Description of Business Arcutis Biotherapeutics, Inc. (the Company) is a commercial-stage biopharmaceutical company focused on developing and commercializing treatments for dermatological diseases with high unmet medical needs. The Company’s strategy is to focus on validated biological targets and to use its drug development platform and deep dermatology expertise to develop differentiated products that have the potential to address the major shortcomings of existing therapies in its targeted indications. The Company received U.S. Food and Drug Administration (FDA) approval of its first product, ZORYVE ® (roflumilast) cream 0.3% (ZORYVE cream 0.3%), in July 2022, for the treatment of plaque psoriasis, including intertriginous psoriasis, in individuals 12 years of age and older (subsequently approved down to 6 years old), and began U.S. commercialization in August 2022. The Company also received Health Canada approval of ZORYVE cream 0.3% in plaque psoriasis in April 2023 and began Canadian commercialization in June 2023. The Company received FDA approval of ZORYVE ® (roflumilast) topical foam 0.3% (ZORYVE foam), in December 2023, for the treatment of seborrheic dermatitis in individuals 9 years of age and older, and began U.S. commercialization in January 2024. The Company received FDA approval of ZORYVE ® (roflumilast) cream 0.15% (ZORYVE cream 0.15%) and began U.S. commercialization, in July 2024, for the treatment of mild to moderate atopic dermatitis in adult and pediatric patients 6 years of age and older. The Company received Health Canada approval of ZORYVE foam for seborrheic dermatitis in October 2024, and began Canadian commercialization in December 2024. The Company received Health Canada approval for ZORYVE cream 0.15% for atopic dermatitis in March 2025, and began Canadian commercialization in April 2025. The Company also received FDA approval of ZORYVE foam 0.3% for the treatment of plaque psoriasis of the scalp and body in adult and adolescents 12 years of age and older in May 2025, and began U.S. commercialization in June 2025. The Company received FDA approval of ZORYVE ® (roflumilast) cream 0.05% (ZORYVE cream 0.05%) in October 2025 for the treatment of mild to moderate atopic dermatitis in children ages 2 to 5 years of age. Initial Public Offering and Follow-On Financings On February 4, 2020, the Company closed an initial public offering (IPO) issuing and selling shares of common stock receiving aggregate net proceeds of approximately $ 167.2 million. The Company completed subsequent public sales of its common stock in October 2020, February 2021, August 2022, and October 2023, receiving aggregate net proceeds of $ 93.4 million, $ 207.5 million, $ 161.6 million, and $ 95.8 million, respectively. In addition to the sale of common stock, the offering completed in October 2023 consisted of prefunded warrants to purchase 7,500,000 shares of the Company's common stock at $ 2.4999 per underlying share of common stock. The exercise price of the warrants is $ 0.0001 per underlying share of common stock. The prefunded warrants are exercisable at any time on or after their original issuance, and all such warrants were outstanding as of September 30, 2025. Subsequent to September 30, 2025, certain prefunded warrants were exercised at $ 0.0001 per share, resulting in the issuance of 2,050,000 shares of the Company's common stock. Following such exercise, prefunded warrants to purchase 5,450,000 shares of the Company's common stock remained outstanding. On February 28, 2024, the Company completed an offering relating to the sale of 15,789,474 shares of the Company's common stock at $ 9.50 per share. The Company also granted the underwriters an option to purchase up to an additional 2,368,421 shares at $ 9.50 per share, which the underwriters exercised in full on February 29, 2024. The aggregate net proceeds to the Company was $ 161.7 million after deducting underwriting discounts, commissions, and estimated offering expenses payable by the Company. At-the-Market (ATM) Offerings On May 6, 2021, the Company entered into a sales agreement (Sales Agreement) with Cowen and Company, LLC (Cowen), under which the Company may from time to time issue and sell shares of its common stock through ATM offerings for an aggregate offering price of up to $ 100.0 million. Cowen will act as the Company's sales agent for the ATM program and is entitled to compensation for its services equal to 3 % of the gross proceeds of any shares of common stock sold under the Sales Agreement. In March 2022, the Company sold 882,353 shares under the ATM for $ 17.00 per share and received $ 14.5 million in net proceeds. In December 2023, the Company sold 1,250,000 shares under the ATM for $ 2.60 per share and received $ 3.1 million in net proceeds. 6 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Condensed Consolidated Financial Statements (unaudited) In January 2024, the Company amended and restated its Sales Agreement with Cowen to reset the ATM program and provide for the offer and sale of shares of common stock having an aggregate gross offering price of up to $ 100.0 million. All other terms of the amended and restated Sales Agreement are substantially the same as the original Sales Agreement. The Company has not yet issued or sold any common stock under the amended and restated Sales Agreement. Liquidity The Company has incurred significant annual losses and negative cash flows from operations since its inception and had an accumulated deficit of $ 1,155.5 million and $ 1,121.9 million as of September 30, 2025 and December 31, 2024, respectively. While the Company generated net income for the quarter ended September 30, 2025, the extent of any net income or losses for future periods is uncertain and the Company may continue to incur losses. The Company had cash, cash equivalents, restricted cash, and marketable securities of $ 191.4 million and $ 228.6 million as of September 30, 2025 and December 31, 2024, respectively. The Company had $ 100.0 million outstanding under the Loan Agreement as of September 30, 2025. See Note 8. The Company believes that its existing capital resources will be sufficient to meet the projected operating requirements for at least 12 months from the date of issuance of its financial statements. If the Company's available cash, cash equivalents and marketable securities and anticipated future cash flows from operations are insufficient to satisfy its liquidity requirements, the Company may need to raise additional capital to fund its operations. No assurance can be given as to whether additional financing will be available on terms acceptable to the Company or at all. If sufficient funds on acceptable terms are not available when needed, the Company may be required to curtail certain planned activities. Failure to manage discretionary spending or raise additional funds, as needed, may adversely impact the Company’s ability to achieve its intended business objectives and have an adverse effect on its results of operations and future prospects. 2. Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (U.S. GAAP), on the same basis as the Company’s audited annual financial statements and, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair statement of the Company’s financial information. Results of operations for any interim period are not necessarily indicative of future or annual results. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Therefore, these unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2024. These condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries and all intercompany balances and transactions have been eliminated. Certain prior year amounts, which are not material, have been reclassified to conform to current year presentation in the condensed consolidated balance sheets, condensed consolidated statement of cash flows and the notes to the condensed consolidated financial statements. Use of Estimates The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Restricted Cash As of September 30, 2025 and December 31, 2024, the Company held $ 0.3 million and $ 0.6 million, respectively, of restricted cash as collateral for a letter of credit related to the Company's lease of office space. 7 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Condensed Consolidated Financial Statements (unaudited) Concentration of Credit Risk and Other Risks and Uncertainties Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, marketable securities, and accounts receivable. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company is exposed to credit risk in the event of a default by either the financial institutions holding its cash or by its customers owing trade receivables to the extent recorded on the condensed consolidated balance sheets. To manage accounts receivable credit risk, the Company continuously evaluates the creditworthiness of its customers and the need for an allowance for credit losses. Fair Value Measurement The Company’s financial instruments, in addition to those presented in Note 4, include cash equivalents, accounts receivable, accounts payable, accrued liabilities, and long-term debt. The carrying amount of cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximate their fair values due to their short maturities. As the long-term debt is subject to variable interest rates that are based on market rates which regularly reset, the Company believes that the carrying value of the long-term debt approximates its fair value. Assets and liabilities recorded at fair value on a recurring basis on the condensed consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows: Level 1—Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date; Level 2—Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Recently Issued Accounting Pronouncements The Company considers the applicability and impact of any recent Accounting Standards Update (ASU) issued by the Financial Accounting Standards Board (FASB). Other than the ASUs listed below, all other ASUs were assessed and determined to be either not applicable to the Company or are expected to have minimal impact on the Company's condensed consolidated financial statements. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires qualitative and quantitative updates to the rate reconciliation and income taxes paid disclosures, among others, in order to enhance the transparency of income tax disclosures, including consistent categories and greater disaggregation of information in the rate reconciliation and disaggregation by jurisdiction of income taxes paid. The Company will adopt ASU 2023-09 for its Annual Report on Form 10-K for the year ended December 31, 2025 and does not expect the standard to have a material impact on its disclosures. In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses , which requires disclosure about the types of costs and expenses included in certain expense captions presented on the income statement. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2024-03. 8 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Condensed Consolidated Financial Statements (unaudited) 3. Revenues Revenues are recognized under guidance within ASC 606, Revenue from Contracts with Customers. The following table presents the Company's disaggregated revenue for the periods presented (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 ZORYVE cream 0.3% $ 30,491 $ 22,041 $ 81,553 $ 54,325 ZORYVE foam 49,781 20,262 119,233 40,405 ZORYVE cream 0.15% 18,947 2,452 43,783 2,452 Total product revenue, net 99,219 44,755 244,569 97,182 Other revenue — — 2,000 28,000 Total revenues $ 99,219 $ 44,755 $ 246,569 $ 125,182 Other revenue relates primarily to the Sato and Huadong licensing agreements. See Note 6. 4. Fair Value Measurements The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands): September 30, 2025 Level 1 Level 2 Level 3 Total Assets: Money market funds (1) $ 47,120 $ — $ — $ 47,120 Commercial paper — 9,813 — 9,813 Certificates of deposit — 2,633 — 2,633 Corporate debt securities — 76,335 — 76,335 U.S. Treasury and agency securities 53,469 1,698 — 55,167 Total assets $ 100,589 $ 90,479 $ — $ 191,068 ______________ (1) This balance includes cash requirements settled on a nightly basis. December 31, 2024 Level 1 Level 2 Level 3 Total Assets: Money market funds (1) $ 71,335 $ — $ — $ 71,335 Certificates of deposit — 5,042 — 5,042 Corporate debt securities — 83,955 — 83,955 U.S. Treasury securities 67,623 — — 67,623 Total assets $ 138,958 $ 88,997 $ — $ 227,955 ______________ (1) This balance includes cash requirements settled on a nightly basis. Money market funds and U.S. Treasury and agency securities are valued based on quoted market prices in active markets, with no valuation adjustment. Commercial paper, certificates of deposit and corporate debt securities are valued taking into consideration valuations obtained from third-party pricing services. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or 9 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Condensed Consolidated Financial Statements (unaudited) similar securities; issuer credit spreads; benchmark securities; prepayment/default projections based on historical data; and other observable inputs. The following table summarizes the estimated value of the Company’s cash, cash equivalents and marketable securities, and the gross unrealized holding gains and losses (in thousands): September 30, 2025 Amortized cost Unrealized gains Unrealized losses Estimated fair value Cash and cash equivalents: Money market funds (1) $ 47,120 $ — $ — $ 47,120 Total cash and cash equivalents $ 47,120 $ — $ — $ 47,120 Marketable securities: Commercial paper $ 9,805 $ 8 $ — $ 9,813 Certificates of deposit 2,633 — — 2,633 Corporate debt securities 76,219 117 ( 1 ) 76,335 U.S. Treasury and agency securities 55,137 31 ( 1 ) 55,167 Total marketable securities $ 143,794 $ 156 $ ( 2 ) $ 143,948 ______________ (1) This balance includes cash requirements settled on a nightly basis. December 31, 2024 Amortized cost Unrealized gains Unrealized losses Estimated fair value Cash and cash equivalents: Money market funds (1) $ 71,335 $ — $ — $ 71,335 Total cash and cash equivalents $ 71,335 $ — $ — $ 71,335 Marketable securities: Certificates of deposit $ 5,042 $ — $ — $ 5,042 Corporate debt securities 83,855 100 — 83,955 U.S. Treasury securities 67,404 219 — 67,623 Total marketable securities $ 156,301 $ 319 $ — $ 156,620 ______________ (1) This balance includes cash requirements settled on a nightly basis. As of September 30, 2025 and December 31, 2024, all securities have a maturity of 18 months or less and there were no individual securities that were in a significant unrealized loss position. The Company generally holds its marketable securities until maturity and does not intend to sell, and is not required to sell, the investments that are in an unrealized loss position before the recovery of their amortized cost basis. 10 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Condensed Consolidated Financial Statements (unaudited) The following table summarizes the change in the fair value of the embedded derivative instrument for the nine months ended September 30, 2025 and 2024 (in thousands). September 30, 2025 2024 Beginning balance $ 570 $ 849 Gain from changes in fair value ( 210 ) ( 429 ) Ending balance $ 360 $ 420 The fair value of the Company’s embedded derivative instrument is based on significant inputs not observed in the market, and thus represents a Level 3 measurement. See Note 8 for further discussion on the embedded derivative instrument. 5. Balance Sheet Components Inventories The components of inventory are summarized as follows (in thousands): September 30, 2025 December 31, 2024 Raw materials $ 6,118 $ 4,300 Work in progress 4,725 584 Finished goods 11,576 9,642 Total inventories $ 22,419 $ 14,526 Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist of the following (in thousands): September 30, 2025 December 31, 2024 Prepaid co-pay assistance program and rebates $ 9,262 $ 7,369 Prepaid insurance 1,258 844 Prepaid clinical trial costs 396 3,244 Other prepaid expenses and current assets 9,397 8,199 Total prepaid expenses and other current assets $ 20,313 $ 19,656 Accrued Liabilities Accrued liabilities consist of the following (in thousands): September 30, 2025 December 31, 2024 Accrued sales deductions $ 61,313 $ 38,430 Accrued compensation 18,303 20,747 Clinical trial accruals 228 — Accrued expenses and other current liabilities 13,131 7,616 Total accrued liabilities $ 92,975 $ 66,793 6. License Agreements & Acquisition Sato License Agreement On February 27, 2024, the Company entered into a license agreement with Sato Pharmaceutical Co., Ltd. (Sato). Pursuant to the terms of the license agreement with Sato (the Sato Agreement), the Company grants to Sato an exclusive, sublicensable (under certain circumstances) license under certain patent rights and know-how 11 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Condensed Consolidated Financial Statements (unaudited) controlled by the Company for Sato to develop, conduct medical affairs activities for, manufacture, commercialize and otherwise exploit roflumilast formulations (the Sato Licensed Products) for all therapeutic uses for certain dermatological indications in humans (the Field) in Japan. The Sato Agreement sets forth each party’s respective obligations with respect to the development, medical affairs activities, manufacture, supply and commercialization of the Sato Licensed Products. Pursuant to the terms of the Sato Agreement, Sato will, at its expense, develop, obtain regulatory approval for, commercialize and conduct medical affairs activities related to the Sato Licensed Products in the Field in Japan, subject to certain of the Company’s approval and oversight rights. Pursuant to the terms of the Sato Agreement, the Company received an upfront payment of $ 25.0 million and will potentially receive additional payments (i) up to an aggregate amount of $ 10.0 million upon the achievement of certain regulatory milestones and (ii) up to an aggregate amount of $ 30.0 million upon the achievement of certain sales milestones. In addition, on a Sato Licensed Product-by-Sato Licensed Product basis, commencing from the first commercial sale of such Sato Licensed Product in Japan until the latest of (i) the expiration of the last valid claim in the intellectual property rights licensed by the Company to Sato under the Sato Agreement covering such Sato Licensed Product in Japan, (ii) the expiration of regulatory exclusivity for such Sato Licensed Product in Japan, or (iii) ten years after the first commercial sale of such Sato Licensed Product in Japan, the Company will receive low double-digit to mid-teen double-digit percentage royalties on Sato’s, its affiliates’ and sublicensees’ total annual net sales of all Sato Licensed Products, subject to certain royalty reductions. The term of the Sato Agreement continues until, on a Sato Licensed Product-by-Sato Licensed Product basis, the expiration of the Royalty Term, which is the (i) the expiration of the last valid claim in the licensed technology covering such Sato Licensed Product in Japan, (ii) the expiration of regulatory exclusivity for such Licensed Product in Japan, or (iii) ten years after the first commercial sale of such Licensed Product in Japan. The Sato Agreement may be terminated by either party in its entirety if the other party commits a material breach, subject to a cure period, or if the other party becomes insolvent. Sato may terminate the Sato Agreement at-will in its entirety upon 90 days’ written notice. Unless unenforceable under applicable law, the Company may terminate the Sato Agreement in its entirety if Sato, its affiliate or sublicensee contests or assists a third party in contesting the scope, validity or enforceability of any patent or patent application licensed by the Company to Sato. The Company may also terminate the Sato Agreement if Sato or any director, officers, employee, agent, affiliate, sublicensee or subcontractor is charged by a governmental authority for a violation of any anti-corruption, anti-money laundering, sanctions or export or import control laws or regulations, or, subject to the terms of the Sato Agreement, if Sato, its affiliates and sublicensees do not conduct any material development or commercialization activities of a Sato Licensed Product in Japan for a certain period of time. Other revenue under the Sato Agreement was zero for the three and nine months ended September 30, 2025, respectively, and zero and $ 25.0 million for the three and nine months ended September 30, 2024, respectively. Huadong License Agreement In August 2023, the Company entered into a license agreement with Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd (Huadong), a wholly owned subsidiary of Huadong Medicine Co., Ltd. Pursuant to the terms of the agreement, the Company granted to Huadong an exclusive, sublicensable (under certain circumstances) license under certain patent rights and know-how controlled by the Company for Huadong to develop, conduct medical affairs activities for, manufacture, commercialize, and otherwise exploit both cream and foam topical roflumilast for all therapeutic uses for certain dermatological indications (Huadong Licensed Products) in Greater China (mainland China, Hong Kong, Macau, and Taiwan) and Southeast Asia (Indonesia, Singapore, The Philippines, Thailand, Myanmar, Brunei, Cambodia, Laos, Malaysia, and Vietnam) (Huadong Territories). Huadong will, at its expense, develop, obtain regulatory approval for, commercialize and conduct medical affairs activities for the Huadong Licensed Products, subject to certain of the Company’s approval and oversight rights. The Company will retain exclusive rights for the development, manufacture and commercialization of topical roflumilast outside the Huadong Territories. As consideration for the rights granted under the license agreement with Huadong (the Huadong Agreement), Huadong paid the Company a non-refundable upfront fee pursuant to the terms of the agreement, upon closing in September 2023. The Company received a net payment of $ 27.0 million, which consisted of a 12 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Condensed Consolidated Financial Statements (unaudited) $ 30.0 million upfront payment less the applicable tax withholding obligation in China of $ 3.0 million. In addition, the Company received a net payment of $ 2.7 million in March 2024 related to the achievement of a development and regulatory milestone less the applicable tax withholding. The Company received a net payment of $ 1.8 million in each of December 2024 and March 2025, related to the achievement of development and regulatory milestones less the applicable tax withholding. The Company may also potentially receive additional payments: (i) up to an aggregate amount of $ 17.0 million upon the achievement of certain development and regulatory milestones, (ii) up to an aggregate amount of $ 40.3 million upon the achievement of certain sales milestones, and (iii) low double-digit to high-teen double-digit tiered percentage royalties on net sales of the Huadong Licensed Products, all of which would be subject to applicable tax withholding obligations. The term of the Huadong Agreement continues on a Huadong Licensed Product-by-Huadong Licensed Product and country or region-by-country or region basis, until the expiration of the Royalty Term, which is: (i) the date of expiration of the last valid patent claim related to the Huadong Licensed Products, (ii) ten years after the first commercial sale of a Huadong Licensed Product and (iii) the expiration of any regulatory exclusivity as to a Huadong Licensed Product. The Huadong Agreement may be terminated by both parties under certain circumstances. For the three and nine months ended September 30, 2025, the Company recognized zero and $ 2.0 million, respectively, of Other revenue, and zero and $ 0.2 million, respectively, of income tax expense, in each case related to the achievement of a development and regulatory milestone. For the three and nine months ended September 30, 2024, the Company recognized zero and $ 3.0 million, respectively, of Other revenue, and zero and $ 0.3 million, respectively, of income tax expense, in each case related to the achievement of a development and regulatory milestone. AstraZeneca License Agreement In July 2018, the Company entered into an exclusive license agreement with AstraZeneca AB (AstraZeneca), granting the Company a worldwide exclusive license, with the right to sublicense through multiple tiers, under certain AstraZeneca-controlled patent rights, know-how and regulatory documentation, to research, develop, manufacture, commercialize and otherwise exploit products containing roflumilast in topical forms, as well as delivery systems sold with or for the administration of roflumilast (collectively, the AZ-Licensed Products), for all diagnostic, prophylactic and therapeutic uses for human dermatological indications (the Dermatology Field). Under the license agreement with AstraZeneca (the AstraZeneca Agreement), the Company has sole responsibility for development, regulatory and commercialization activities for the AZ-Licensed Products in the Dermatology Field, at its expense, and it shall use commercially reasonable efforts to develop, obtain and maintain regulatory approvals for, and commercialize the AZ-Licensed Products in the Dermatology Field in each of the United States, Italy, Spain, Germany, the United Kingdom, France, China and Japan. The Company paid AstraZeneca an upfront non-refundable cash payment of $ 1.0 million and issued 484,388 shares of Series B convertible preferred stock, valued at $ 3.0 million on the date of the AstraZeneca Agreement, which were both recorded in research and development expense. The Company subsequently paid AstraZeneca the first milestone cash payment of $ 2.0 million upon the completion of a Phase 2b study of ZORYVE cream 0.3% in plaque psoriasis in August 2019 for the achievement of positive Phase 2 data for an AZ-Licensed Product, which was recorded in research and development expense. In the third quarter of 2022, the Company paid $ 7.5 million to AstraZeneca as a result of the approval of ZORYVE cream 0.3%, which was recorded as an intangible asset. In the second half of 2024, the Company paid $ 5.0 million to AstraZeneca upon achievement of $ 100.0 million in worldwide net sales, which was recorded as a cumulative catch-up adjustment to the carrying value of the intangible asset. In the first half of 2025, the Company paid $ 10.0 million to AstraZeneca upon achievement of $ 250.0 million in worldwide net sales and was recorded as a cumulative catch-up adjustment to the carrying value of the intangible asset. The Company is amortizing the intangible asset to cost of sales over its useful life of 10 years from the date of first commercial sale as this is the minimum amount of time that the related AstraZeneca Agreement will be in effect. Amortization expense was $ 0.6 million and $ 4.1 million during the three and nine months ended September 30, 2025, respectively. Amortization expense was $ 1.2 million and $ 1.6 million during the three and nine months ended September 30, 2024, respectively. The Company has agreed to make additional cash payments to AstraZeneca of up to an aggregate of $ 5.0 million upon the achievement of specified regulatory approval milestones with respect to the AZ-Licensed Products. With respect to any AZ-Licensed Products the Company commercializes under the AstraZeneca 13 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Condensed Consolidated Financial Statements (unaudited) Agreement, it will pay AstraZeneca a low to high single-digit percentage royalty rate on the Company’s, its affiliates’ and its sublicensees’ net sales of such AZ-Licensed Products, subject to specified reductions, until, as determined on an AZ-Licensed Product-by-AZ-Licensed Product and country-by-country basis, the later of the date of the expiration of the last-to-expire AstraZeneca-licensed patent right containing a valid claim in such country and ten years from the first commercial sale of such AZ-Licensed Product in such country. As a result of the commercialization of ZORYVE cream 0.3% in August 2022, the Company began accruing royalties payable to AstraZeneca, which are recorded in cost of sales and accrued liabilities. Royalty expense was $ 2.9 million and $ 7.3 million during the three and nine months ended September 30, 2025, respectively. Royalty expense was $ 1.4 million and $ 3.0 million during the three and nine months ended September 30, 2024, respectively. Ducentis Biotherapeutics LTD Acquisition On September 7, 2022, the Company entered into a Share Purchase Agreement with Ducentis Biotherapeutics LTD (Ducentis) and certain stockholders of Ducentis, pursuant to which the Company acquired all of the outstanding equity interests in Ducentis for (i) 610,258 shares of the Company's common stock, valued at approximately $ 12.5 million, and $ 15.9 million in cash, inclusive of liabilities acquired, and (ii) contingent payments of up to an aggregate of $ 400 million, which may become payable upon the achievement of certain development, regulatory, and commercial milestones (the Acquisition). Such contingent payments include a $ 10.0 million payment due within one year from the first dosing of the first human subject enrolled in the first Phase 1 clinical trial of a therapeutic drug containing Ducentis' DS-234 product candidate, now ARQ-234. The Company anticipates commencing such Phase 1 study in the first quarter of 2026. In addition, if applicable, the Company will make payments amounting to a mid-single-digit percentage of any annual net sales of certain products exceeding $ 1.5 billion. The Company accounted for this purchase of equity interests in Ducentis as an in-process research and development (IPR&D) asset acquisition, as it has no alternative future use, and recorded a $ 29.6 million charge to research and development expense on the acquisition date. Any contingent payments made under the Share Purchase Agreement will be recorded when it is probable that they will occur and they can be reasonably estimated, at which point the Company will determine whether the payment should be expensed or capitalized depending on whether the IPR&D has achieved market acceptance. There were no payments made or due for the three and nine months ended September 30, 2025 and 2024, respectively. Under the terms of the Share Purchase Agreement, the Company will develop and seek FDA approval of a therapeutic product containing ARQ-234 for an atopic dermatitis indication, and if FDA approval of ARQ-234 is obtained by the Company, to commercially launch it in the United States. 14 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Condensed Consolidated Financial Statements (unaudited) 7. Commitments and Contingencies Operating Lease The Company's lease for its corporate headquarters ( 22,643 square feet of office space) commenced in February 2019 and was amended in April 2020 in order to relocate to a new expanded space. In August 2025, the Company entered into a second amendment to extend the term of the lease by five years , extending the lease expiration from August 2028 to July 2033. This second amendment had a net effect of increasing the Company's future lease payments by approximately $ 5.4 million, primarily due to the five additional years of rent payments. In accordance with ASC 842, the Company remeasured the present value of the aggregate lease payments over the amended lease term and recorded an increase to the Company’s operating lease liabilities and existing right-of-use lease asset of approximately $ 2.9 million in the third quarter 2025 as a result of this remeasurement. Indemnification In the ordinary course of business, the Company enters into agreements that may include indemnification provisions. Pursuant to such agreements, the Company may indemnify, hold harmless, and defend an indemnified party for losses suffered or incurred by the indemnified party. Some of the provisions will limit losses to those arising from third party actions. In some cases, the indemnification will continue after the termination of the agreement. The maximum potential amount of future payments the Company could be required to make under these provisions is not determinable. The Company has never incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. The Company has also entered into indemnification agreements with its directors and officers that may require the Company to indemnify its directors and officers against liabilities that may arise by reason of their status or service as directors or officers to the fullest extent permitted by the provisions of the Company's Bylaws and the Delaware General Corporation Law. The Company currently has directors’ and officers’ insurance coverage that reduces its exposure and enables the Company to recover a portion of any future amounts paid. The Company believes any potential loss exposure under these indemnification agreements in excess of applicable insurance coverage is minimal. Contingencies From time to time, the Company may be involved in legal proceedings, as well as demands, claims, and threatened litigation, which arise in the normal course of business or otherwise. The ultimate outcome of any litigation is uncertain, and unfavorable outcomes could have a negative impact on the Company's results of operations and financial condition. Regardless of outcome, litigation can have an adverse impact on the Company because of the defense costs, the diversion of management resources, and other factors. As of September 30, 2025 and December 31, 2024, the Company determined that no loss contingencies from legal proceedings—including the patent infringement complaint filed against the Company by Teva Pharmaceutical Industries, Ltd.—met the threshold of "reasonably possible", as defined in ASC 450. Accordingly, no material amounts have been accrued related to loss contingencies under ASC 450. 15 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Condensed Consolidated Financial Statements (unaudited) 8. Long-term debt On December 22, 2021, the Company entered into a loan and security agreement (the Prior Loan Agreement) with SLR Investment Corp. (SLR) and the lenders party thereto. The Prior Loan Agreement was amended and restated on January 10, 2023 (the AR Loan Agreement) to include Arcutis Canada, Inc. as a borrower and party. On November 1, 2023, the Company entered into an amendment to the AR Loan Agreement to, among others, (i) modify the financial covenant relating to minimum net product revenue, and (ii) include an additional minimum financing covenant. On August 9, 2024, the Company entered into a second amendment to the AR Loan Agreement (the AR Loan Agreement, as amended by the first and second amendments, the Loan Agreement), which it determined to be a modification, to, among others, (i) permit, during the period commencing on October 7, 2024 and ending on December 15, 2024, an optional partial prepayment of term loans outstanding, subject to a 1.0 % prepayment penalty (the 2024 Partial Prepayment), (ii) add the tranche C-1 and tranche C-2 term loans, and (iii) facilitate certain other changes, including with respect to the applicable interest rate and maturity date in the event of a 2024 Partial Prepayment. As security for the obligations under the Loan Agreement, the Company granted SLR, for the benefit of the lenders, a continuing security interest in substantially all of the Company's assets, including its intellectual property, subject to certain exceptions. The term loan facility is comprised of (i) a tranche A term loan of $ 75.0 million, (ii) a tranche B-1 term loan of $ 50.0 million, (iii) a tranche B-2 term loan of up to $ 75.0 million, (iv) a tranche C-1 term loan of up to $ 50.0 million, and (v) a tranche C-2 term loan of up to $ 50.0 million (collectively, the Term Loans). The tranche A term loan was funded on December 22, 2021. With the approval of ZORYVE cream 0.3% on July 29, 2022, the tranche B term loans were funded on August 2, 2022. As of September 30, 2025 and December 31, 2024 , the aggregate principal amount outstanding under the Loan Agreement was $ 100.0 million. On October 8, 2024, the Company made a 2024 Partial Prepayment of $ 100.0 million, which reduced the aggregate principal amount outstanding under the Loan Agreement to $ 100.0 million. In connection with the 2024 Partial Prepayment, the Company is obligated to pay a prepayment penalty of $ 1.0 million by June 30, 2026 and a final fee of $ 6.95 million, representing the final fee applicable to the amount of the 2024 Partial Prepayment, on January 1, 2027. As a result of such 2024 Partial Prepayment, subject to the Company generating a minimum net product revenue for the trailing six ( 6 ) month period ending as of the month prior to the borrowing date equal to 80 % of the Company’s projected net product revenue as set forth in its annual plan for the respective period, the Company will be able to draw down the tranche C-1 and tranche C-2 term loans. The tranche C-1 term loan availability will expire on March 31, 2026 and the tranche C-2 term loan availability will expire on June 30, 2026. In addition, as a result of the 2024 Partial Prepayment, (i) the maturity date of the Loan Agreement is August 1, 2029, (ii) the applicable per annum interest rate is equal to 5.95 % plus the greater of (a) 2.50 % per annum and (b) the one-month Secured Overnight Financing Rate (SOFR), (iii) the Company is no longer subject to certain cost and purchase price restrictions regarding acquisitions, and (iv) the Company may prepay principal amounts outstanding under the Term Loans in minimum increments of $ 25.0 million, subject to a prepayment premium of (a) 3.0 % for any prepayment made prior to the first anniversary of the second amendment, (b) 2.0 % for any prepayment made prior after the first anniversary of the second amendment and prior to the second anniversary of the second amendment, or (c) 1.0 % for any prepayment made prior after the second anniversary of the second amendment and prior to the maturity date. Principal amounts outstanding under the Term Loans will accrue interest at a floating rate equal to the applicable rate in effect from time to time, as determined by SLR on the third business day prior to the funding date of the applicable Term Loan and on the first business day of the month prior to each payment date of each Term Loan. Prior to the 2024 Partial Prepayment, the applicable rate was a per annum interest rate equal to 7.45 % plus the greater of (a) 0.10 % and (b) the one-month SOFR. As a result of such 2024 Partial Prepayment, the applicable interest rate will be a per annum interest rate equal to 5.95 % plus the greater of (a) 2.50 % and (b) the one-month SOFR. On September 30, 2025, the rate was 10.20 %. The benchmark SOFR is subject to change in the event of certain events with respect to the benchmark rate. Interest payments are payable monthly following the funding of any Term Loan. 16 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Condensed Consolidated Financial Statements (unaudited) If the Term Loans are accelerated due to, among others, the occurrence of a bankruptcy or insolvency event, the Company is required to make mandatory prepayments of (i) all principal amounts outstanding under the Term Loans, plus accrued and unpaid interest thereon through the prepayment date, (ii) any fees applicable by reason of such prepayment, (iii) the prepayment premiums set forth in the paragraph above, plus (iv) all other obligations that are due and payable, including expenses and interest at the Default Rate (as defined below) with respect to any past due amounts. The Loan Agreement contains customary representations and warranties and customary affirmative and negative covenants, including, among others, requirements as to financial reporting and insurance and restrictions on the Company’s ability to dispose of its business or property, to change its line of business, to liquidate or dissolve, to enter into any change in control transaction, to merge or consolidate with any other entity or to acquire all or substantially all the capital stock or property of another entity, to incur additional indebtedness, to incur liens on its property, to pay any dividends or other distributions on capital stock other than dividends payable solely in capital stock or to redeem capital stock. The Company also agreed to a financial covenant whereby the Company must generate a minimum net product revenue equal to 75 % of its projected net product revenue as set forth in the Company's annual plan for the respective period, tested on a trailing six-month basis, as of the end of each month. Each annual plan shall be approved by the Company’s board of directors and SLR, in its capacity as collateral agent, in its reasonable discretion. Any failure by the Company to deliver such annual plan on or before December 15 of the prior year shall be an immediate event of default. The Company was in compliance with all covenants under the Loan Agreement as of September 30, 2025. In addition, the Loan Agreement contains customary events of default that entitle the lenders to cause any indebtedness under the Loan Agreement to become immediately due and payable, and to exercise remedies against the Company and the collateral securing the Term Loans. Under the Loan Agreement, an event of default will occur if, among other things, the Company fails to make payments under the Loan Agreement, the Company breaches any of the covenants under the Loan Agreement, subject to specified cure periods with respect to certain breaches, the lenders determine that a material adverse change has occurred, or the Company or the Company's assets become subject to certain legal proceedings, such as bankruptcy proceedings. Upon the occurrence and for the duration of an event of default, an additional default interest rate, or the Default Rate, equal to 4.0 % per annum will apply to all obligations owed under the Loan Agreement. The prepayment upon default and other potential additional interest provisions under the Loan Agreement were determined to be a compound embedded derivative instrument to be bifurcated from the loan and accounted for as a separate liability for accounting purposes under the guidance in ASC 815, Derivatives and Hedging . At the inception of the Loan Agreement, the fair value of the embedded derivative was determined to be immaterial. The embedded derivative instrument is remeasured at fair value each reporting period with any future changes in fair value reported in Other income, net in the condensed consolidated statement of operations and comprehensive income (loss). The amounts recognized in Other income, net related to the change in fair value of the embedded derivative instrument during the three and nine months ended September 30, 2025 and 2024 were not material. The fair value of the embedded derivative instrument as of September 30, 2025 and December 31, 2024 was a liability of $ 0.4 million and $ 0.6 million, respectively, and is included in Other long-term liabilities in the accompanying condensed consolidated balance sheets. See Note 4. I n connection with the Loan Agreement, the Company is obligated to pay (i) a final fee equal to 6.95 % of the aggregate original principal amount of the Term Loans outstanding as of the date of the second amendment (x) with respect to any 2024 Partial Prepayment, upon the earliest to occur of (a) January 1, 2027, (b) the acceleration of all outstanding Term Loans and (c) the prepayment, or refinancing, substitution or replacement of all outstanding Term Loans, and (y) with respect to the Term Loans outstanding as of the date of the second amendment (other than the 2024 Partial Prepayment), upon the earliest to occur of (a) the maturity date, (b) the acceleration of all outstanding Term Loans and (c) the prepayment, or refinancing, substitution or replacement of all outstanding Term Loans, (ii) a 2.00 % fee with respect to tranche C term loans, due and payable on the earliest to occur of (a) the maturity date, (b) the acceleration of all outstanding Term Loans and (c) the prepayment, or refinancing, substitution or replacement of all outstanding Term Loans, (iii) a 2.00 % extension fee with respect to tranche C term loans which remain unfunded after December 31, 2025, which shall accrue during the period commencing January 1, 2026, and ending on the earliest to occur of (a) the expiration of the tranche C term loan availability, and (b) the date on which tranche C term loan is fully drawn, and (iv) a certain amount of lenders’ expenses incurred in connection with the execution of the Loan Agreement. Additionally, in connection with the original Prior Loan Agreement, the Company previously had entered into an Exit Fee Agreement, whereby the Company agreed to pay an exit fee in the amount of 3.0 % of each Term Loan funded upon (i) any change of control transaction or (ii) a revenue milestone, calculated on a 17 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Condensed Consolidated Financial Statements (unaudited) trailing six-month basis. Notwithstanding the prepayment or termination of the Term Loan, the exit fee will expire 10 years from the date of the Loan Agreement. The debt issuance costs have been recorded as a debt discount which are being accreted to interest expense through the maturity date of the term loan. Interest expense is calculated using the effective interest method, and is inclusive of non-cash amortization of debt issuance costs. The final maturity payment of $ 13.9 million is recognized over the life of the term loan through interest expense. At September 30, 2025 and December 31, 2024, the effective interest rate was 11.31 % and 11.57 %, respectively. Interest expense relating to the term loan was $ 3.1 million and $ 9.1 million for the three and nine months ended September 30, 2025, respectively, and $ 6.6 million and $ 21.6 million for the three and nine months ended September 30, 2024, respectively. The following summarizes additional information related to the Company's long-term debt (in thousands): September 30, 2025 December 31, 2024 Long-term debt, gross $ 100,000 $ 100,000 Accrued final fee 8,430 7,324 Accrued prepayment penalty 1,000 1,000 Unamortized debt issuance costs ( 932 ) ( 1,121 ) Total carrying value of debt 108,498 107,203 Less current portion ( 1,000 ) — Total long-term debt, net $ 107,498 $ 107,203 Upon the contractual maturity of the Company's long-term debt, a payment of principal and final fees of $ 107.0 million is due on August 1, 2029. 18 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Condensed Consolidated Financial Statements (unaudited) 9. Stock-Based Compensation Stock Option Exchange Program On January 16, 2024, the Company commenced an offer to certain eligible employees and consultants to exchange certain outstanding eligible options to purchase shares of the Company’s common stock for a lesser number of restricted stock unit (RSU) awards pursuant to an option exchange program (the Option Exchange). The Option Exchange expired on February 12, 2024. Pursuant to the Option Exchange, eligible option holders elected to exchange, and the Company accepted for cancellation, eligible options to purchase an aggregate of 5,059,129 shares of the Company’s common stock, representing approximately 98 % of the total shares of common stock underlying the eligible options. On February 13, 2024, immediately following the expiration of the Option Exchange, the Company granted 2,129,594 shares of Replacement RSU Awards, pursuant to the terms of the Option Exchange. The Replacement RSU Awards will vest based on continued service with the Company over a period of either 1 , 2 or 3 years, depending on the grant date of the exchanged options. The exchange of stock options was treated as a modification for accounting purposes, which requires an incremental expense of $ 8.6 million to be recognized for the Replacement RSU Awards over their new service periods ( 1 - 3 years). In addition, any unamortized expense remaining on the exchanged options as of the modification will be recognized over their original remaining service period. Stock Option Activity The following summarizes option activity: Number of Options Weighted- Average Exercise Price Remaining Contractual Term (Years) Aggregate Intrinsic Value ($, in thousands) Balance—December 31, 2024 5,342,909 $ 6.69 8.01 $ 43,120 Granted 2,245,719 13.69 Exercised ( 326,202 ) 5.92 Forfeited ( 534,345 ) 9.55 Expired ( 2,865 ) 26.87 Balance—September 30, 2025 6,725,216 $ 8.83 7.87 $ 69,596 Exercisable—September 30, 2025 2,941,734 $ 8.33 6.62 $ 33,111 The aggregate intrinsic value is calculated as the difference between the exercise price of the options and the fair value of the Company’s common stock as of September 30, 2025. The intrinsic value of options exercised for the nine months ended September 30, 2025 and 2024 was $ 2.9 million and $ 1.7 million, respectively. The total grant-date fair value of the options vested during the nine months ended September 30, 2025 and 2024 was $ 6.6 million and $ 3.1 million, respectively. The weighted-average grant-date fair value of options granted during the nine months ended September 30, 2025 and 2024 was $ 9.69 and $ 3.64 , respectively. Restricted Stock Unit Activity The following table summarizes information regarding the Company's RSUs: Number of Units Weighted-Average Grant Date Fair Value Balance—December 31, 2024 6,055,087 $ 8.04 Granted 2,876,897 13.73 Vested ( 1,999,065 ) 8.57 Forfeited ( 743,035 ) 9.99 Unvested Balance—September 30, 2025 6,189,884 $ 10.28 19 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Condensed Consolidated Financial Statements (unaudited) The grant date fair value of an RSU equals the closing price of the Company's common stock on the grant date. RSUs generally vest equally over four years , except for those issued in connection with the Option Exchange as previously described. Stock-Based Compensation Expense Stock-based compensation expense included in the condensed consolidated statements of operations and comprehensive income (loss) was as follows (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Research and development $ 3,059 $ 3,342 $ 9,287 $ 10,341 Selling, general and administrative 6,976 6,899 21,017 21,996 Total stock-based compensation expense $ 10,035 $ 10,241 $ 30,304 $ 32,337 As of September 30, 2025, there was $ 28.1 million of total unrecognized compensation cost related to unvested options that are expected to vest, which is expected to be recognized over a weighted-average period of 2.7 years. As of September 30, 2025, there was $ 50.5 million of total unrecognized compensation cost related to RSUs that are expected to vest, which is expected to be recognized over a weighted-average period of 2.8 years. 10. Earnings (Loss) Per Share Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted-average common shares outstanding. Diluted net earnings per share is computed by dividing the net loss by the weighted-average number of common share equivalents outstanding for the period determined using the treasury-stock method. Pre-funded warrants to purchase 7,500,000 shares of the Company's stock were included in the weighted-average common shares outstanding used in calculating basic and diluted net income (loss) per share for the three and nine months ended September 30, 2025 and 2024. The following table is a reconciliation of the share amounts used in calculating basic and diluted earnings (loss) per share: Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Weighted-average common shares outstanding - Basic 127,622,860 124,302,317 126,891,285 119,627,687 Effect of dilutive securities 5,261,707 — — — Weighted-average common shares outstanding - Diluted 132,884,567 124,302,317 126,891,285 119,627,687 Potential dilutive securities, which include unvested RSUs and unvested performance-based RSUs for which established performance criteria have been achieved as of the end of the respective periods, vested and unvested options to purchase common stock and shares to be issued under the Company's employee stock purchase plan (ESPP), have been excluded from the calculation of diluted net income (loss) per common share in each period in which the Company recorded a net loss, as the effect is antidilutive. The following outstanding potentially dilutive shares have been excluded from the calculation of diluted net income (loss) per share for the periods presented due to their anti-dilutive effect: As of September 30, 2025 2024 Stock options to purchase common stock 2,672,832 5,634,494 RSUs subject to future vesting 27,837 6,487,840 ESPP shares subject to future issuance 82,600 115,926 Total 2,783,269 12,238,260 20 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Condensed Consolidated Financial Statements (unaudited) 11. Segment Reporting The Company has one reportable segment relating to the development and commercialization of treatments for dermatological diseases. The Company’s Chief Operating Decision Maker (the CODM) is its Chief Executive Officer. The CODM evaluates financial information on a consolidated basis for the purposes of allocating resources and assessing performance. The table below is a summary of the segment profit or loss, including significant segment expenses (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Total revenues $ 99,219 $ 44,755 $ 246,569 $ 125,182 Less: Cost of sales 8,123 4,231 20,903 10,577 Topical roflumilast program costs 3,340 1,320 7,613 7,839 Topical JAK inhibitor program costs 61 1,089 780 2,351 Other early-stage programs costs 1,379 2,910 5,069 8,878 Research and development compensation and personnel-related expenses 10,553 9,834 29,970 29,574 Selling, general and administrative expenses 62,269 58,692 195,186 171,412 Other segment expenses (1) 4,968 5,745 17,662 15,316 Total operating expenses 90,693 83,821 277,183 245,947 Operating income (loss) 8,526 ( 39,066 ) ( 30,614 ) ( 120,765 ) Other income, net 2,035 4,182 6,861 13,455 Interest expense ( 3,071 ) ( 6,653 ) ( 9,082 ) ( 21,617 ) Provision for income taxes 80 — 701 324 Segment and consolidated net income (loss) $ 7,410 $ ( 41,537 ) $ ( 33,536 ) $ ( 129,251 ) (1) Other segment expenses include professional services related to research and development, medical affairs, depreciation and amortization expenses. 21 Table of Contents